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Diary giant Fonterra has endured a second tainted milk powder scare after a supplier advised that melamime had been found in an iron supplement.

Group director manufacturing and supply chain Gary Romano said German-based company Budenheim told Fonterra an iron supplement it supplied to food companies worldwide had tested positive for melamine.

Fonterra used small quantities of the iron supplement in 12 fortified whole milk powder products.

Fonterra immediately stopped all production using the supplement and undertook extensive testing of the affected batches.

"No melamine had been detected in any of its products," Mr Romano said.

"Fonterra has calculated that, given the small amount of iron supplement used in some of its products, if melamine was present in the finished product it would be at levels 50-100 times lower than the New Zealand Food Safety Authority (NZFSA) guideline.

"Based on all current world standards there is absolutely no health risks to consumers."

The NZFSA guidelines allowed for 2.5 parts per million and regarded any concentration below 0.1 parts per million as a negative result.

Budenheim was supplying Fonterra with a new iron supplement product which had tested negative for melamine.

Food Safety Minister Kate Wilkinson said Fonterra had advised the Government on February 11 of the Budenheim problem.

"Melamine has been detected in an imported ingredient used to fortify food with iron in New Zealand but consumers are not at any risk," she said.

Two tests on the raw ferric pyrophosphate found unacceptable levels of melamine but testing of the final Fonterra product showed no detectable trace.

"As a result of the investigation, I am certain there are no safety concerns for consumers," Ms Wilkinson said.

"All the necessary precautions were taken and the authority implemented the risk management strategy put in place last year to address melamine concerns quickly and effectively."

Companies worldwide are on the alert for melamine contamination after it was added to milk powder in China in a scandal which left six babies dead.

A Chinese court sentenced to death cattle farmer Zhang Yujun, 40, and milk trader Geng Jinping for the contamination, which also left hundreds of thousands of infants ill.

The contaminated milk powder was produced by Sanlu, a company 43 per cent owned by Fonterra, which has written off its $200 million investment.

A third man, Gao Junjie, was given a death sentence for endangering public safety, but it was suspended for two years, and may be commuted to life in prison.

The chairwoman of Fonterra's Sanlu venture, Tian Wenhua, 66, will also spend the rest of her life behind bars as well as being fined 24.7 million yuan ($5.6 million).

She learned of problems with her company's BeiBei milkpowder from consumer complaints around mid-May of last year but the company did not stop producing and selling formula until about September 11.